Unilaminar liposomes that retain their contents in circulation can alter the pharmacokinetics of anticancer agent in favorable ways. We show, through in vitro studies that intact liposomes composed of distearoylphosphatidylcholine and cholesterol and containing daunorubicin (DaunoXome ) are taken up into P1798 tumor cells. These liposomes produce an enhanced cytotoxicity relative to free drug for incubation times longer than about 8 hours. For in vivo studies, we developed and employed a non-invasive fluorescence imaging technique to follow the accumulation of DaunoXome within murine tumors. Fluorescence microscopy of thin sections of tumors from animals injected with DaunoXome demonstrates persistent high levels of daunorubicin fluorescence within cells and throughout the tumor mass. Free daunorubicin, in contrast, transiently achieves modest levels of fluorescence and rapidly drops to background within a few hours. These results indicate distinct mechanisms for the localization of free and liposomal daunorubicin and suggest that DaunoXome can provide sustained intracellular levels of drug within the tumor.